February 2024 / United States

Kansas will continue to tax individuals based on graduated income tax brackets, as the state Legislature failed to override Governor Laura Kelly (D)'s veto of legislation, which would have adopted a flat income tax system with a rate of 5.25%

Voting 81-42 on 20 February 2024, the 125-member Kansas House of Representatives failed to secure a two-thirds majority vote, which is mandated by the state Constitution to override the Governor's veto. Had the House secured the necessary number of votes, HB 2284 would have returned to the state Senate, where it would also need a two-thirds majority vote.

Source: IBFD Tax Research Platform News

The UK Supreme Court has held that the withdrawal of the VAT low value consignment relief was not a customs duty charge and dismissed the taxpayer company's appeal.

(a) Facts. Jersey Choice Ltd (JCL), is a company registered in Jersey (one of the Channel Islands). JCL grows and maintains horticultural products in Jersey and exports these in small packets by mail order, mainly to consumers in the United Kingdom. VAT was not charged because low value consignment relief (LVC Relief) was applied, which exempted goods valued below GBP 15. Article 6(1) of the European Union (EU) VAT Directive specified territories forming part of the EU customs territory to which the directive did not apply and the Channel Islands were article 6(1) territories.

In 2012, the UK removed LVC relief on such mail order imports into the United Kingdom from the Channel Islands. This action was taken to combat "round tripping", where goods were exported from the United Kingdom to the Channel Islands and then re-imported into the United Kingdom without payment of VAT. JCL took legal action against the UK Treasury.

(b) Issue. JCL argued that when the United Kingdom removed LVC relief on goods from the Channel Islands, this equated to a customs duty being imposed, contrary to EU provisions on the free movement of goods. On the other hand, the UK Treasury argued that the VAT charge was UK tax and was subject to the EU fiscal regime rather than the EU customs regime.

(c) Decision. The Supreme Court noted that a customs duty had to satisfy two tests:

• it must apply only to imported products; and
• it must not be part of a general system of internal dues applicable systematically to categories of products according to objective criteria applied without regard to the origin of the products.

The Supreme Court held that the VAT charge on imports from the Channel Islands failed both tests. First, a charge would not be a customs duty simply because it was imposed when goods crossed a border. If that was true, all VAT on imports would qualify. The court noted: "Corresponding products supplied within the UK are subject to VAT in precisely the same way. It is, therefore, a charge applied to domestic and imported goods alike."

Secondly, the court considered that the charge was properly characterized as internal taxation. VAT is a recognized turnover tax applied across the European Union and the ability to grant the exemption and remove the charge were given by the Exemptions Directive, "which is undoubtedly a tax law".

Further, the principles of equal treatment and proportionality would also not apply. Consequently, JCL's appeal was dismissed.

The decision of the Supreme Court, dated 14 February 2024, can be found here.

Source: IBFD Tax Research Platform News

The US Treasury Department (Treasury) has reissued its list of countries that require cooperation with, or participation in, an international boycott as a condition of doing business. The Treasury published the list in the Federal Register on 16 February 2024.

The list, which is unchanged from the previous list published on 24 October 2023, includes the following eight countries:

• Iraq;
• Kuwait;
• Lebanon;
• Libya;
• Qatar;
• Saudi Arabia;
• Syria; and
• Yemen.

The listed countries are identified pursuant to section 999 of the US Internal Revenue Code (IRC), which requires US taxpayers to file reports with the Treasury concerning operations in the boycotting countries. Such taxpayers incur adverse consequences under the IRC, including denial of US foreign tax credits (FTCs) for taxes paid to those countries and income inclusion under subpart F of the IRC in the case of US shareholders of controlled foreign corporations (CFCs) that conduct operations in those countries.

Source: IBFD Tax Research Platform News